Good day and welcome to the Equity Residential 2Q 2016 Earnings Conference Call. This call is being recorded.

Now at this time, I'll turn the call to your host Marty McKenna. Please go ahead sir.

Marty McKenna

Thanks, Jay. Good morning and thank you for joining us to discuss Equity Residential’s second quarter 2016 results and outlook for the year. Our featured speakers today are David Neithercut, our President and CEO; David Santee, our Chief Operating Officer; and Mark Parrell, our CFO. Please be advised that certain matters discussed during this conference call may constitute forward-looking statements within the meaning of the federal securities law. These forward-looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or supplement these statements that become untrue because of subsequent events.

And now I'll turn over to David Neithercut.

David Neithercut

Thank you, Marty. Good morning, everybody. Thanks for joining us. Clearly 2016 will not turn out to be the year we had originally expected due to deteriorating market conditions in San Francisco and New York City, which combined made up 50% of our initial growth forecast for the year. As David Santee will address in greater detail in just a moment. At the time of our first quarter earnings call nearly all indicators suggested that while the top end of our original expectations was off the table another year of solid up with 4% growth in same-store revenue was most likely.

As strong demand continued to absorb new supply with little impact to existing inventory. The month of May however brought sudden and material changes to the fundamental picture particularly San Francisco and a 50 basis point reduction in the Company’s expected revenue growth for the year. Last 60 days fundamentals have continued to weaken in this markets causing us to yet again reduce our expectations for full year of revenue growth, in which for the first time in many years we now expected to have a free handle. And as a result after five years of extraordinarily strong fundamentals revenue growth this year will not be more in line with historical trends.

Like many of the participants on today’s call, we too would prefer revenue growth with a four, or even at a five handle but markets do reset from time to time either due to new supply or changes in the demand side of equation. Unfortunately, the present time we’re experiencing both factors in two of our most important markets. The weakness we’re experiencing in San Francisco, New York City is driving reductions in our revenue growth expectations for the year.

So with that said I’ll let David Santee go in to more detail about what’s occurred over the last 60 to 90 days, how it’s impacted us during the primary leasing season and our expected results for the year.

David Santee

Okay. Thank you, David. Good morning, everyone. This morning I’ll address or advice same-store revenue guidance and give you some color on overall operations. As Boston, DC, Seattle and Southern California are all generally performing in line with our expectations. I’ll focus my commentary on San Francisco and New York. We welcome any questions you have on our other markets in the Q&A. Today Mark will address our same-store expenses in his remarks.

As David said in his comment, we would not meet revenue expectations that we announced in June and that is due in large part, to the continued volatility that we’re seeing in San Francisco and to a lesser extent New York as these markets work to absorb new supply. Together these two markets accounted for approximately 50% of our expected revenue growth in 2016. The deterioration in both markets is driving more volatility than we have experienced in our portfolio over the last half dozen years.

Now that markets are less stable as a result of elevated supply and pressure on the highly compensated job sector optimizing occupancy comes at a cost for rate growth. Now when we gave revised guidance in June, San Francisco new lease rents had gone from being up 5% in Q1 down to flat in a matter of weeks. We assumed as a result of some of the irrational pricing we saw on new lease-ups, that we would see rates deteriorate further into negative territory. But that we could still achieve similar occupancy as we move through peak leasing season. We felt comfortable about occupancy because the last week of May occupancy was 20 basis points higher than the same week last year and exposure was 20 basis points lower.

We thought certainly if Seattle could absorb elevated supply with minimal disruption, San Fran could do the same. Our forecast for San Francisco new lease rents to go negative proved to be true very quickly as new lease rents are now negative 3% versus same week last year. Unfortunately over the next four weeks our occupancy assumptions for San Francisco missed the mark and today we sit at 95.8% occupied, a 110 basis points lower than the same week last year.

The deterioration of both metrics and the knowledge that new supply continues to be delivered in to rest of this year and heavily in the first half of next has led us to lower our full year growth expectation for San Francisco to be around 6.5%, down from our expected 7.75% in June and the original 9.5% growth we expected when we gave you our original guidance in Q4 of last year.

San Francisco accounted for about a third of our same-store revenue growth in 2016 and so this decline along with New York City accounts for the 100 basis points off of the entire portfolio. In San Francisco, we have seen a sizable amount of new supply over 8,000 units being delivered in 2016 and it is all at the high end of the market. This supply has hit the market at the same time that job growth in the tech sector has hit the pause button. We still see good demand for units as evidenced by how well our newly completed developments are leasing up. But we are feeling the impact of our target demographic having more choices than before.

In the second quarter, our lease over lease Delta was up 2.1%, in July was up 95 basis points, while renewals were up 8.6%. Occupancy was 96.2% and turnover excluding same property transfers increased 30 basis points from same quarter last year. Through Q2 turnover excluding transfers is down 30 basis points from 25% to 24.7%. Looking forward new lease rents are expected to remain in the minus 3% range for July and August, our renewals achieved for July are 8% and currently 6.9% for August. Again, occupancy is 95.8%, but is on the expected seasonal upswing as students return to school.

Now switching to New York, when we gave guidance in June, it was clear that New York was going to deteriorate further. We are comfortable that we have forecasted the appropriate mix of rate and occupancy for the balance of the year. New York job growth expectations were at the time stable. While the economy there appears to be on solid footing and the overall job growth is at expected levels. The bulk of job added today are mid-level compensation types jobs dominated by hospitality, leisure, followed by healthcare.

Professional services, our demographic typically the higher paying jobs held by our target demographic was a close third. The New York market continues to work to absorb approximately nearly 9,000 units this year and with the great majority of that supply at the high end absorption has not been as robust as we would expect. As a result, it’s possible that 2016 deliveries will carry over into 2017 lease ups. We are already expecting a more elevated pipeline of new products scheduled for delivery in both 2017 and 2018.

The concern in New York is that these elevated levels of supply mainly private and fee managers to elevate upfront move in concessions beginning in the fourth quarter of 2016. Now in our shop as we immediately take a cash charge in our same-store revenue of the full concession in the month of move-in our revenue stream would be more impacted this year than if we amortize those concessions over the term of the lease. For example, year-to-date we would have reported a 4.5% if we have straight-line concessions versus the 4.4% that we reported.

As a result sequential quarter over quarter and full year revenue growth will be more impacted this year. Much of the new supply delivered in 2016 has been focused on the left side Jersey City and Brooklyn, all very competitive to our same-store portfolio in the market.

2017 we’ll see deliveries across a number of submarkets especially Long Island City and Brooklyn, but the left side we’ll see continued deliveries as well. Our current expectation for full year same-store revenue growth for New York is now around 1.5%, which is down from the 2.25% growth expectation, we had at the beginning of June and the 3.75% growth expectation we had to start the year.

New York accounted for about 15% of our expected 2016 same-store revenue growth. In the second quarter, our lease over lease Delta was minus 80 basis points, in July is minus 95 basis point. Renewal rates achieved were 4.3% for the quarter with July at 3.3%. Renewals achieved thus far for August and September are 3.4% and 2.8% respectively. Turnover excluding same-store, same property transfers increased a 100 basis points quarter-over-quarter to 10.1% and a 100 basis points year to-date to 17.4%. Today occupancy is 96.2% with new lease rates slightly negative.

Now before I close I want to assure you that no one is more disappointed about having to lower our guidance again and more than the entire team here at EQR as well as myself. I can also say that each stop along the way we were diligently to give you our best estimate at the time based on our collective experience.

As David said at the end of April occupancy, exposure, turnover, renewal rents, new lease rents, all indicated another good year in San Francisco. Unfortunately as we continue to increase rents in May, the market decided to get conservative and we had to react accordingly. We are obviously experiencing extremely volatile markets and this volatility is very difficult to predict. Perhaps in hindsight we were initially over optimistic on San Francisco given the levels of new supply bottom line this year, but based on our dashboards at the end of April and later in the early June, we would never have predicted the falloff in new lease rents and occupancy that we experience today. David?

David Neithercut

Okay. Thank you, David. As noted in last night’s earnings release, we’ve also made some changes toward expected transaction activity for the year. Dispositions have now been reduced to $6.9 billion down from $7.4 billion. This $500 million reduction has resulted three factors. First, about a $150 million of the non-Boston [indiscernible] assets that are in various stages of the disposition process. We’ll not likely close this year, will carry over into the first quarter of 2017.

Second, the original disposition guidance included a $200 million portfolio of assets we have decided to hold for the present time as we see continued upside in both operations and valuations there and think that sale at this time would be premature. And lastly, as noted in last night’s release, we did not acquire any assets in the second quarter and reduced our acquisitions expectations for the year by $150 million.

Since any incremental acquisitions will be funded by sales proceeds we’ve reduced dispositions by a similar amount. During the second quarter we did sell three non-core assets for $112.5 million at 5.7% disposition yield and a 9.3% unleveraged IRR. In addition to selling these assets in Arizona, Massachusetts and Connecticut, last quarter we also sold our entire interest in the military housing at Joint Base Lewis McChord in Tacoma, Washington, in realizing a gain of $52.4 million. Now we’ve been involved with Lewis McChord since 2002 during which time we renovated over 2200 homes and built more than 800 new homes for men and women who called the McChord Joint Base Home while serving our country. We’re very proud of our work at Lewis McChord last 14 years and it was really our honor and privilege to be involved there.

With regard to our development business we commenced construction of the one small development project in the second quarter in Washington D.C., we’re billing 222 units or $88 million or $396,000 a unit. At an expected yield on cost at today’s rents in the mid 5s. The deal was in the NoMa market and will be delivered in late 2018 and is expected to stabilize in late 2019.

We’re also currently working on two small projects totaling $90 million that could start construction yet this year, with a weighted average cost on at today’s rents in the mid to high 5s. During the second quarter, we also completed construction in our lease-up of three new development deals all in the San Francisco market, two Downtown and one in North San Jose. These assets are leasing extremely well and are experiencing monthly absorption rates in excess of original expectations. From a pricing standpoint like our same-store portfolio we’re not achieving the rents we’d hoped at the beginning of the year, but the rents we are achieving are well in access of those underwritten at the time these sites were acquired and constructions commenced. And as a result these assets will provide stabilized yields from the high 5s to high 7s, which are well in excess of our original expectations.

I’ll turn the call now over to Mark Parrell.

Mark Parrell

Thank you, David. Today, I’ll be giving some color behind our same-store expense guidance and the change to our normalized FFO guidance. I’ll then discuss how the change to our normalized FFO guidance impacted the remaining special dividend payment and our debt issuance guidance. In all these cases I’m comparing the guidance numbers we gave you in late April 2016 as part of our first quarter earnings call to the revised guidance that we provided last night. As you might recall the June 1 press release only revised our same-store revenue and NOI ranges.

So moving onto the same-store expense side, we have left our annual same-store expense range at an increase of 2.5% to 3% and this is not withstanding the fact that same-store expenses year-to-date have only grown by 0.9%. This implies so we expect second half same-store expenses to grow at a considerably higher rate of about 4.6%. As usual our big three expense categories of real estate taxes, utilities, and payroll will drive these numbers.

We now expect property taxes to increase at a rate of about 6% versus our previous expectation in our year-to-date number of 5.5%. This increase is due to a recent adverse legal decision regarding the calculation of property taxes, with several of our properties in New Jersey City. We also previously forecast payroll growth up 2.5% to 3% and we still believe that forecast to be accurate. Year-to-date payroll has only increased 0.3%, so we see most of the expected increase in payroll as backend loaded.

For the year, we expect utilities expense to decline by approximately 3%, year-to-date utilities expenses down 8.1%. Mostly expected growth in the second half on the utility side is due to our expectation of somewhat higher commodity prices later in this year as compared to the historically low commodity prices we have in the third and fourth quarters of 2015.

Moving onto normalized FFO, the reduction in the same-store NOI from a midpoint back in April of 5.5% to a midpoint now of 4%, causes a normalized FFO reduction of about $23 million or about $0.06 per share. Going the other way an increase in our normalized FFO estimate we now expect an additional $4 million in NOI or about $0.01 per share for the positive due to the reduction in dispositions combined with these asset sales being pushed back further into the year.

David Neithercut previously discussed the reasons for this reduction in our disposition activity. Our reduction in acquisition guidance from $600 million to $350 million and disposition guidance from $7.4 billion to $6.9 billion has only had a very modest impact on the amount of taxable gain that we only incur in 2016 and need the special dividend.

This is because the specific assets that we removed from our disposition guidance just specifically at relatively little tax gain and because we have already paid with the $8 per share March 2016 special dividend, the preponderance of the tax gain that we will incur in 2016. We therefore left our guidance for the annual special dividend in the range of $2 to $4 per share with the thought that the ultimate amount that we will pay is likely to be at or slightly lower than that midpoint. Our guidance assumes that this payment will be made in the fourth quarter of 2016. All dividend payments are subject still to the approval of our Board of Trustee.

Moving on to the debt side, because our next disposition activity is about $250 million lower than we expected back in April our projected line balance at December 31, 2016 is anticipated to now be about $430 million versus the $130 million we previously estimated. For now we have left our debt issuance guidance at about $225 million. But if our disposition process goes as expected we may do a larger offering than is now included in our guidance in either the secured or unsecured markets later in 2016.

And I’ll now turn the call back over to the operator for the question-and-answer session period.

Hey, it’s Michael Bilerman here with Nick. Santee, thanks for the color surrounding from the guidance moves and look we can certainly appreciate you in the short-term business. Your portfolio is more concentrated in the two of the biggest markets that you are in have some more volatility. And I don’t want to get into the specifics of the numbers, but I want to focus on your processes and procedures in terms of forecasting and the results. And there was many of us have been to your offices, we've seen all the reams of data, we’ve seen all the pricing systems that you have and you’ve now reduced guidance three times.

So we were trying to figure out sort of what are the issues in terms of, is your assets forecasting system, not driving the right rates and so are the inputs not right or the outputs not right is it in operations issue or is it a FP&A issue that’s causing this because you can have one strike, two strikes, but doing it three times, one could imagine that there are other issues at play here than just the market in terms of how the data is coming in relative to your expectation and also what you put out to the street. And on the slight side, I don’t think a 500 unit building sort of popped up overnight, It would be input that you would, so maybe other, I don’t know if you want to take that, but sort of give some color around some of the processes and procedures that are going on.

David Santee

Well. I guess I would say that our process is very collaborative. These decisions are not made in a vacuum. There is probably six of us that run our models from different perspectives, but at the end of the day, we all kind of lined up in the same place. I think a lot of the volatility has been very quick and at very in opportune times. One of the things that makes it very difficult to forecast is when we look at the precipitous drop and new lease rents in San Francisco. And look, we’ve had Boston, DC, all of these other markets have delivered outsized supply, but have relatively strong occupancy. And as I said in my prepared remarks, we were prepared for rents to go down. When you look at the new lease ups, if the new lease ups are giving one month free basically you can move into a brand new building at 2015 rent.

If new a lease up is giving two months free, you could move into a brand new building at 2014 rent. I think to some extent, we are a victim of our own success on the renewal side. When you look at San Francisco 35% of our expirations are almost 5% above current street rents and with volatility ranging from plus 2% to as much as down 10% at certain properties in San Francisco it really comes down to who moves out and at what property do they move out of. I mean at with rents down 10% a person could be 6% above current market rents, a 16% decline on $4,000 month rent and at times a couple 100, couple 300, each month for a couple of months winds down your revenue stream pretty quickly.

So I hope that gives you a little more granular explanation of why it is very difficult to predict –the rate of decline that we can expect especially in the peak season where you have 15% of your leases expiring in June, July and August, each month. So extreme volatility, with the highest number of transactions in the year, with job growth really coming to a halt at the high end of the market, is just making it very difficult to forecast forward. New York is kind of in the same boat 45% of our expirations.

Michael Bilerman

You don’t think it’s an input issue for how you are managing your business in terms of, you know, that you’re just sort of rolling with market. I think the market has come to expect that you have a little bit better insight into the day-to-day incident especially the time where you had to already lower guidance twice, one would imagine the second time you did it, one would hope that you’ve built enough conservatism. I guess what I’m really asking is the whole processes that you have in place off, right? Is it not producing what you wanted to produce? The markets going to do what the market's going to do you’ve built some tools and you seem to be disproportionately having to play catch up a little bit. And so that's what I'm more curious is about the processes and procedures you have rather than what's happening in to the marketplace.

David Santee

Well. I guess I would say that our processes that we have in place especially at the top level, the company level, certainly worked with a lot of big numbers. Certainly I don't think with fixed markets today, that you would expect us to give or see us give guidance in October. I think that some of the – I mean basically I think that we were overly optimistic about San Francisco. And really just kind of mirrored at some point in time judgment has to come into play. But what's different also about California, is that California is a 30-day market. All of our other markets are 60-day market so you have a longer runway to see, who is giving notice. You have longer runway to react to pricing and what have you. And so this is, the San Francisco in the 30-day market with these dramatic changes within 30-days and is just very hard to forecast and very hard to react as quickly to adjust.

David Neithercut

Let me just add one thing there Michael, just general serve the philosophy we have with respect to this. Our intent every time is to give our investors our best guess as to how we see our business performing going forward. Not 90% of that best guess or 80% percent of that best guess, or 75% of the best guess but rather our best guess based upon the tools we have at our disposal, bills we have on the ground and the judgment of people who have been doing this for a awful long time. It's not intended to give you the range of all possible outcomes, but those outcomes that we think are most probable based upon the tools that we have in the judgment that we use. And as David said, these markets have turned to become quite volatile, it's become far more difficult to do that, but each step of the way we try and give you our best guess and again, whereas David said, we are as disappointed as anyone about where we are relative to where we ended up but, we believe we have an obligation to be as transparent with the Street as we can. And to give them our absolute best guess, not build in all sorts of cushion but to tell out like we see it. And we think we have done that every step of the way and it is just difficult to do so when things are moving and moving very quickly in markets that were budgeted to deliver 50% of our growth.

You still have a reputation as an operator that can outperform or perform in-line with your comps in your markets. What can you share regarding how your portfolio is performing relative to your comps in your markets?

David Santee

Well, when you – if you want to talk, markets and submarket, I think if you look at San Francisco, we’ve delivered a 9.9% CAGR over the last four or five years. I think if you look back over the last five years, I think all but one we had the highest revenue growth especially in San Francisco. You know, we – after every quarter, we kind of take our portfolio – because a lot of this is just about location, location, location, location. One of our competitors in Boston, they have fewer properties. We have many properties. We go through an exercise where we take our properties that are in, the two or three properties that are in the suburbs and the other two or three properties that are up North, and we look at our – we create a similar portfolio to our competitors.

And I would say that, every time we are very comfortable with our performance when we create similar portfolios to our competitors.

David Bragg

Thanks, David. So I think your investors are trying to discern the degree to which you are having forecasting versus execution challenges and you're saying that, as far as you can tell, there's no difference in the execution relative to that of your peers this year, than in the past. Is that fair?

David Santee

Yes. That is fair. And I would add a comment. In the case of San Francisco, I don't think it's, you know any surprise or secret, that some of our competitors, have agreed or self-imposed renewal limits. Where we have not done that. That is also been a key driver of our leading the market in San Francisco for the last four, five years. But at the same time, when you reach an inflection point and the market comes down very quickly, we're going to come down just as quick and we’re going to come down much harder than our competitors.

So, again, I – we will go through this exercise again after everyone reports. And we will matchup our head to head properties with theirs. And like previous years, I expect that our execution will prove to be very good.

David Bragg

Okay. Thank you for that. And a question for David Neithercut, what are your thoughts – how does this experience so far this year inform you’re thinking on your strategy? Are the markets and submarkets that you're in truly as high barrier as you believed? And they’re clearly priced in the private market for superior NOI growth, which at least over the near-term is not what was expected. To what extent is the transaction market for these assets weakening along with the fundamentals?

David Neithercut

Well. I think they might be priced for superior total return over extended time period. And I just simply the NOI growth in the short-term. I'd say the assets in these markets continue to trade at very low cap rate stage with three handles. In some instances even through a three handle there continues to be perhaps not as much demand, but certainly sufficient demand for these hard assets that in these Gateway cities that we've not seen any change in value at least for the present time. Now there may be because there might be fewer tours and potentially fewer buyers, maybe did ask spreads widening in certain instances, but the transaction that we are seeing getting done in the market in which we operate that continues to support the valuations that we've been talking about.

Just with respect to strategy, I think we've gone in with our eyes wide open that by operating in fewer markets were likely to have more volatility. But again, we think these are the markets that are going to create jobs and these are the markets where people are going to want to live, work and play and they’ll perform best over the long-term. As David noted, we've had 10% compounded annual growth rate in San Francisco over the past five years. If it was flat jobs – flat revenue growth for the next five, over 10 years it would still be 4.5 which is very, very strong revenue growth.

So we remain very committed to the markets we are in. We think that again these are the place where the economy going forward will drive and that we’ll see better overall risk adjusted total returns in these markets. We've seen construction costs continue to go up in these markets and replacement costs going up. But I guess I'd also say that in these markets, while there is elevated or more supply than we’ve seen in the past as a percentage of existing inventory, these are troubling amounts of new supply and in a historical context, unprecedented levels of new supply. So it's more than we’ve seen, it's disrupting us somewhat but a governance by just our lease ups particularly in San Francisco that you’ve gone extraordinarily well, demand is there.

And we couldn't be happy with the product we’re delivering and will outperform our original expectations and we think we are in the right place for a long-term perspective.

David Bragg

Okay. Thank you for that. One last one if I may, in light of the underperformance of the stock and the fact that it's discounted on an absolute basis and cheaper than its peer set or cheaper than it's ever been, versus its peer set, can you update us on what you can do proactively to attempt to narrow the discount between the private and public market values? What are you evaluating or thinking about doing in terms of asset sales or joint ventures?

David Neithercut

I guess we’re selling almost $7 billion of product of this year and returning a significant amount of that back to our shareholders in the leverage neutral basis. So I'm not sure there's anybody who's done more this year than we have in that regard. But I guess as I've said, too many of our investors that [indiscernible] and have said repeatedly, I mean everything is on the table. We are up-to-date painfully aware of where the stock price trades relative to those values. And we'll pursue and consider everything. I’d just would reiterate what I think I've said on our last call and certainly as evidenced by the gains that we’ve realized on those assets that we've sold as part of this larger process. We've got significant gains in almost everything we’ve owned. I think we’ve been very good capital allocators and we made a lot of money.

And as a result of that, by the time after one looks at the gains of assets and run those things on the balance sheet repo basis, if things went off on a lot of asset sales to have any real impact on stock buybacks. So it's just been more challenging than what I think many investors might think. But everything is always on the table and will look at everything between now and the end of the year.

So I wanted to hit on David Nethercutt’s comment earlier on the probable outcome versus the range of outcomes with respect to guidance. So specifically on the topic of the range of outcome, how bad you think San Francisco and/or New York could actually get? And then, I don't believe this was actually answered earlier, but does the guidance as it currently stands build in some cushion against current trends as you described them or as it simply a extrapolated what you are seeing in the market currently?

David Santee

Well, this is David Santee. Someone asked me could New York, be negative? It’s certainly possible. I mean we are focused more on this year. We certainly have as I noted in my comments, we are already seeing a lot of the marketing employees in New York, one private company is offering a $1,000 gift card on any rental. So we are just kind of playing off there at knowing that we were kind of forced to use can set upfront concessions in Q1 in New York. Knowing that the level of supply that's still in Lisa, knowing what's coming next year – we have built-in what we think are necessary levels of concessions or commissions or what have you to get us through the end of the year.

Rich Hightower

Okay. And the same would apply in San Francisco?

David Santee

Yes, we really haven't seen a lot of the marketing items or move-in concessions, for that matter are in the legacy portfolio. I mean the only concessions that we have seen thus far, are on the new lease ups. And I think people are rushing to get these buildings filled. Whether it's because they have occupancy requirements by their lender or a variety of other reasons. But we really haven't seen anything out of the ordinary other than rapidly declining new lease rents and less demand on the older type property.

Rich Hightower

Okay. Thanks, David. And one quick question on the demand side of the equation, so and it's not something unique to what EQR is doing this quarter. But it does seem that there has been a shift in tone or shift in the data perhaps with respect to tech sector job growth or wage growth or both. Would you say that is a material shift in what you're seeing in your tenant base or perspective tenant base versus three or six months ago?

David Santee

Absolutely. I mean if you look at the data, first it was, DC funding. Then your tech jobs, the high-paying tech jobs peaked in Q1 of 2016. I just read the other day, DC spending was down another 20% in Q2. So certainly, the tech jobs are not growing at the pace that they were last year. If they are growing at all. But at the same time folks that lived in a 30-year-old, two-story walk-up paying you know, $3,000 for a one bedroom, can move uptown into a brand-new, highly amenitized, glass tower with gorgeous views of the San Francisco Bay for about the same money.

So the people that can afford it are moving into the better properties, but then there's less demand for the older properties as a result the further you get down the peninsula as a result of a lower job growth in the tech sector.

Rich Hightower

All right. Thanks, David.

David Santee

Thank you, Rich.

Operator

And now, Nick Yulico with UBS. Please go ahead.

Nick Yulico

Thanks, everyone. Just going back to the visibility question. I'm wondering as we were now almost through seven months of the year in a lot of the prime leasing season, can you quantify how much of the year's revenue results are sort of baked in and not at risk. Assuming you don't have a meaningful occupancy problem. I mean is it 60% or is it something higher? Can you give us some visibility into August and September at this point. So I'm trying to figure out, with all debate out, may be what happens in 2017. How much debate is a really left about what could happen in 2016 versus your guidance?

David Santee

Well, and that's a great question. Because over the last, six, seven years we've kind of always said, once you get to August or September that your year is really baked. And if we look back, the last six or seven years, all of the markets really had the same momentum, I mean all of the markets went down in the great recession. And then all of the markets kind of came up together. During those years, you really had virtually no new supply to speak of. So it was very easy to forecast just based on momentum.

Certainly when you get to August, the rate portion that drives revenue growth in the current year is baked. I mean, those there's just not enough transactions remaining in the year to meaningfully impact the full year revenue. But what can meaningfully change your revenue September, October, November, December is certainly occupancy and more importantly concessions. Because as I mentioned in my prepared remarks, if we give a full month concession, that's an 8% discount that we take a full charge on in that month. So if concessions – upfront concessions really ramp up, which we are not a fan of where we tried to be a net effective rent shop. Then that will seriously impact your revenue stream, in that month and for the next that couple of months.

Nick Yulico

So obviously – I don't know if you gave this or not, I think you may have given just it for New York and San Francisco but where is sort of overall occupancy in the portfolio as of today?

David Santee

Overall occupancy today, I think is 95.9. And some of these markets like Boston is a little lower because Boston is a heavy student oriented market. But occupancies and SoCal are great, probably a little bit better than we expected. Washington DC's occupancy is right where we thought it would be. Seattle is doing great and accelerating. So again physical occupancy is not necessarily the driver of revenue. A dollar – assuming, occupancy is worth $1, occupancy in San Francisco is worth $1.50, right? Versus a point of occupancy in Inland Empire might be worth $0.75. Physical occupancy does not necessarily translate into economic occupancy.

Nick Yulico

Okay. That’s helpful. And then I guess David Neithercut or Mark Parrell, how much room is sort of left to do more asset sales this year from a tax standpoint special dividend standpoint, if you wanted to do a stock buyback – I mean, at what point does the board start thinking about doing something more strategic about a stock buyback is it a period of several quarters for the stock to really trade at a discount of [indiscernible] or I mean how should we sort of think about that from a timing standpoint.

David Neithercut

I just have you and I’ve already mentioned this Nick. Everything is always on the table. We consider these things and will be very thoughtful about what it is, what our options are to deal with the disconnect between the stock price and to NAV. But again as I served in response to some are the brighter questions, it's challenging with the gains that we had that we realized and having been pretty good capital allocators over the past dozen years to be able to really move the meter in a huge way. But there's no timing thing, it's just something that we we'll consider and we can be believes on the table all the time.

Nick Yulico

Okay. Thanks, everyone.

David Santee

You’re welcome, Nick.

Operator

And now we’ll hear from Jeff Pehl with Goldman Sachs.

Jeff Pehl

Hi, good morning.

David Santee

Good morning.

Jeff Pehl

Just a follow-up on a question on performance, how do you think A assets performing versus B assets, and are there any markets were B asset to outperforming is?

David Santee

Well. I've always said its kind of location. I mean yes, we own A assets. We own B assets, the B assets and D, C are you doing the same as A assets. We don't see any difference. I mean if you look at our portfolio in San Francisco o or New York, you run the gamut of A's and B's and they are performing differently depending upon where are the new supply as on the demand for that product in the location that they sell.

Jeff Pehl

Great, thanks. And just another quick one, can you provide an update on the amount of new move out to purchase a home?

David Santee

Yes. It's really negligible. So bought homes move out to buy homes this year is actually year-to-date, is down 20 basis points, of that 12.1% of move out.

Jeff Pehl

Great. Thanks for the color.

David Santee

You’re welcome.

Operator

Rob Stevenson with Janney. Go ahead please.

Rob Stevenson

Good morning, guys.

David Santee

Hi, Rob.

Rob Stevenson

So you previously talked about the deliveries in Manhattan being Westside just heavy this year along with some of the other submarkets, but then when we got to 17, it was mostly Long Island City and Brooklyn. It sounded like today, you through the Westside in there again. Is that a change are seeing now when you are looking at those likely 17 deliveries? Are you seeing more in Manhattan especially on the Westside then you have been you would have seen three or six months ago.

David Santee

I think what – well, first of all, we are now kind of combining the upper Westside with Midtown West when we talk about new supply. So Midtown West, and upper Westside are going to be delivering probably 2,400 units Next year, which relative to the overall supply is what 15%. I think the concern is that we do have some very large deliveries that occurred early in the year in the upper Westside, 1,100 unit property that is still only 50% leased. That’s going to start running into renewals before they are least up. While at the same time adding a little more supply will kind of compound the rate challenges that we see in Midtown West and the upper Westside. But the upper Westside, specifically as a neighborhood is only expected to deliver 2,000 – I'm sorry 214 units into 17.

Rob Stevenson

Okay. So it's really Midtown West that still going to see the supply within Manhattan in 17?

David Santee

Yes.

David Neithercut

As well as continued lease up in 17 and product delivered in 16.

David Santee

Yes.

Rob Stevenson

Okay. And then one for Mark, the difference – the $0.07 gap between the third quarter guidance between NAREIT FFO and core FFO or Normalized FFO, what is that?

Mark Parrell

So I’m sorry, you're talking about the difference in our guidance change or the difference between…

Rob Stevenson

So you got 82 to 86 range for NAREIT FFO and is 75 to 79 for Normalized FFO. What is the difference between 82 to 75 and 86 to 79?

Mark Parrell

So we have some land sale gains, but we really have their as Fort Lewis. And then the third quarter that $0.07 is going to be some land sale gains.

Rob Stevenson

Okay. So Fort Lewis and land sale gains makes up that $0.07 differential?

David Santee

I want to correct that. The $0.14 to the last two columns is Fort Lewis. To the right the $0.07 you referenced are the land sale gain.

Rob Stevenson

Okay. So there's $0.07 of land sale gains in the third quarter?

David Santee

That are projected. Sales haven’t all occurred. They may not. But that’s what we would expect based on what we have under contract now.

Rob Stevenson

Okay, perfect. Thanks, guys.

Operator

Now, we’ll move to Tayo Okusanya. Please go ahead, with Jefferies.

Tayo Okusanya

Yes. Hi, good morning. I'm just trying to reconcile the new guidance versus the old. The midpoint of guidance when it comes down $0.02, but just from the comments – kind of talk about the $0.06 loss from NOI and then the $0.01 gain from the delay in the asset sales. That's about $0.05 of downside. So I'm wondering why the midpoint of guidance really went down $0.02.

Mark Parrell

Hey Tayo, it’s Mark Parrell. Absolutely rightful question, the issue there is that we sort of started from a point that's higher than our midpoint. So when we talk back in February about our guidance we put out a wider, you might recall Normalized FFO range than usually a $0.20 range.

We told we had more variability in our numbers because we had all of disposition activity and we didn't know when it would occur and obviously the later it occurred, the higher FFO would be in the earlier more we de-risk the special dividend. But we really didn't have all of that and certainty, we also did know when we would paying special. What debt we pay off. There's just a lot of moving pieces. So when we put our range together, and we spoke to you in February, we spoke to you in April, we saw on our range a way in which we could get modestly above the midpoint of our range and into the upper half of our old range. If we sold our assets relatively slowly. And so we gave ourselves a little flexibility.

As our operating conditions deteriorated as we became more certain about what debt we are paying off, when we're going pay the specials and what assets are going to be sold, that what caused the whole thing to gravitate down. So the map is actually like $0.06 down on same-store, $0.01 up on transaction. But I’m starting from a higher point in the 310 you are.

Tayo Okusanya

Got it, okay. That makes sense. Thank you.

Mark Parrell

Thank you.

David Santee

You’re welcome.

Operator

Alexander Goldfarb with Sandler O'Neill. Go ahead please.

Alexander Goldfarb

Good morning, there. Just I’d some quick questions here. David Santee, you had mentioned New York that you expect supply to extend through 2018, just in general, looking across all your markets including San Francisco, when do you think – do you see the current supply wave continuing to be an issue through 2018? Or do think that maybe by mid-17, based on what you're seeing most of the market should have everything absorbed?

David Santee

Well, for New York I guess its kind of a good news, bad news. I mean there is still not a 421 A program in place. So nothing is being really considered today. But we're looking at roughly 14,000 units [indiscernible] in New York for 2017, and I believe another 14,000 again in 2018.

Alexander Goldfarb

Okay. And what about the other markets? You have San Francisco? What will be the other markets?

David Santee

Yes, I mean San Francisco is going to deliver 7,000 units next year. Next year is going to be a very similar delivery cycle as we saw this year. Let's see – Washington, D.C., 10,000 this year, 9,000 in 2017; Seattle, 70 to 80 this year, about 7,000 next year; Los Angeles, 9,000 this year, 8,800 next year; Orange County, 3,900 this year, 5,400 next year; then San Diego, 1,600 this year, 2,700 next year.

But I think it's important to note that as an example Orange County, a lot of the deliveries that are occurring this year are in North Orange, Anaheim, where we have no product versus last year all of the deliveries were centered in Irvine, where the bulk of our properties sit and we were greatly impacted. So we're seeing great results in Orange County as the result of the supply – the new deliveries being in a totally different submarket and far away from our existing portfolio.

David Neithercut

But I'd say beyond that Alex our expectations as for deliveries to come down are being built to yields that we are seeing markets today are extremely low. And we certainly understand that the lending community is becoming much more conservative with respect to advance rates and who they’re willing to sponsor. And I hear more and more – transaction team is seeing more and more inquiries about capital needs for developers who might have land tied up to complete the capital stack et cetera. So our expectation is just given to where our built to yields are today and what we understanding and we are seeing what’s happening in the construction loan market are – we will expect the deliveries to come down from new 16% and 17% levels.

Alexander Goldfarb

Right. But what you guys have just outlined, it just sounds like collectively we've got another sort of full year through end of 2017 to get through the supply before we’ll get to the benefit of the tighter lending standards. Is that seems to be a…

David Santee

Yes, I think that's right. But again as we look at what these unit counts are as a percentage of the additional stock, these are again not unquestionable levels. We believe our levels might put these markets for some period of time more in equilibrium after they have been [indiscernible] equilibrium over the past half a dozen years.

Alexander Goldfarb

Okay. And then for Mark Parrell, if we look at the sequential San Francisco revenue and rent growth, second quarter versus first quarter, there’s still positive growth for San Francisco in its physical rental rate and in the revenue growth? Should we expect – based on the comments, should we expect these numbers to go negative in the back half of the year or just because how much you’ve already locked in for the year, these numbers will actually still stay positive despite the commentary you discussed?

Mark Parrell

I want to have the clarifying question. Do you mean quarter-over-quarter do we expect to have a negative NOI number in the third or fourth quarter? Or do you mean our sequential revenue numbers?

Alexander Goldfarb

The sequential – on a linked quarter basis not a year-over-year basis.

Mark Parrell

I think it will be slightly positive the whole way through. You probably would see it and it wouldn’t be unexpected to see declines in the fourth quarter than the first just as you sort of see the normal seasonal pattern. But you're talking about this year. I guess at this point we don't see that.

David Neithercut

None of us.

Alexander Goldfarb

Okay. So really next year we're going to see the bulk of this softness in next year's numbers?

Mark Parrell

What is given the 2017 values, then yes, that’s probably likely.

Alexander Goldfarb

Awesome. Listen, thanks a lot guys.

David Neithercut

You're welcome.

Operator

We have John Kim with BMO Capital Markets. Please go ahead.

John Kim

Thank you. Given your portfolio quality you underweight affordable product in your portfolio, is that something that you think needs to be addressed? Not necessarily different market, but maybe different product or different submarket.

Mark Parrell

Well, I think I’m not sure, by affordably you just mean lesser Christ more workforces by pricing or you actually mean product that has requirements to meet certain income restriction or requirements of residents? I will tell you that we – as David Santee already said, we do operate in A product quality, we operate in B product quality across our portfolio and we do have various price points across every market and some market in which we operate.

John Kim

Okay. And then David Neithercut, you mentioned the challenge of moving the needle with buybacks. But so far you’ve done no credit from the market on your special dividend and your asset build a huge gain. Going forward on dispositions, would you consider joint issue asset sales, which may provide some more flexibility on proceeds?

David Neithercut

That’s certainly something we considered on the table as well.

John Kim

Is there are difference in pricing on joint ventures versus complete asset sales.

David Neithercut

Different in pricing? No, I think that, I think that there is sufficient price discovery in these markets that whether it’s an outright sale or a joint venture type transaction, I think similar pricing can be achieved.

John Kim

Great. Thank you.

David Neithercut

You’re welcome.

Operator

And [indiscernible] with Bank of America. Please go ahead.

Unidentified Analyst

Hi, thanks for the time. I was just hoping you could clarify some comments you made about San Francisco concessions. Were you saying that there’s no concessions on your existing product and relates only at the new sort of lease up developments and is that true outside of EQR.

David Santee

I would say that I know there are some people that are giving modest concessions. But it’s – they are not widespread. I mean, the – all of the new developments for the most part are giving kind of at a minimum one if not two months free on every lease. But we have – we have not seen widespread upfront move-in concessions across, you know, existing product in San Francisco.

Unidentified Analyst

Okay. Great. Thank you. And just a question on, on your redevelopment CapEx, kind of rehab work that you’re doing, I think you’re targeting $50 million. Is there any – I’m not sure what returns you’re targeting there, but is there any risk that you may not get the returns given the supply competition in the markets where that money is maybe being spent? And how should we think about that?

Mark Parrell

For as our expectations in underwriting goes $11,000 or so per door that we put into kitchen and bath rehabs, we’re getting solid double-digit returns. I mean our returns on that – in that expenditure. And should we fail to get that reasonable sort of spread in to an un-rehabed, we have the ability to stop the program. So we do monitor that closely. Consistently looking at the returns we’re getting on rehab units and if for whatever reason at any time, if were not getting those premium we can stop that program on a dime.

Unidentified Analyst

Is there a geographic skew to where that spend is going?

Mark Parrell

No. I mean where doing it in any property and any market that we believe can get that sale appropriate mid-teen return.

Unidentified Analyst

Thank you.

Mark Parrell

You’re welcome.

Operator

And next we hear from Ivy Zelman with Zelman and Associates.

Ivy Zelman

Good morning and thank you for taking my questions.

David Neithercut

Good morning.

Ivy Zelman

With regard looking – good morning with the turnover if I’m correct is a annualized turnover of 59.2 which was up about 280 basis points I guess versus our expectations for 150. So it was a little more than we had expected and recognizing turnover has been pretty low throughout the last few years. With respect to understanding the expenses, as turnover accelerates, how much are you factoring in our guidance for turn over to be sustained at current levels and how much variability does that have on NOI with respect to turnover accelerating more? And maybe you know maybe in the case it has been in the less several quarters or even last few years?

David Neithercut

Well I guess I would say, a large portion of the increase in the physical turnover is a direct result of more people relocating in the same property for a variety of reasons. They either need more space, less space, lost a roommate – so in those cases, I mean, the frictional cost are you know, roughly $234 to clean, paint and shampoo an apartment. And you’re not – you’re not giving up any vacancy costs for that portion of your physical move out so to speak. So you know, like anything – the largest cost of turnover is vacancy. And when you net out the turnover, you know, it’s not really that material. We have seen an elevated

Ivy Zelman

No, I’m sorry. That’s really helpful. I was trying to say on a go forward basis, so you’re assuming sort of the same level of turnover, kind of holding where we are to extrapolate no real change in guidance on turnover. Or in your embedded assumptions for your guidance.

David Neithercut

No. No change.

Ivy Zelman

And then just secondly I think everyone has drilled a lot into San Francisco and New York city and you guys have done a great job in helping us understand the variability and respective volatility you have seen in the highest peak leasing fees. And I’m kind of just thinking about looking at the ratio of you know, 2014 and 2015 urban multi-family permits as a percent of stock and Boston is screening the high second-highest after New York. And you obviously have exposure there as well Seattle and LA. Just thinking about how do you today extrapolate in, especially’s Seattle you said is accelerating and recognizing that you are seeing improvement and really haven’t seen same type of volatility in DC even if also screening not as badly as New York, let’s say Boston. When you’re giving us guidance, are you extrapolating the current trend like you had been in the guidance earlier in the year. And unfortunately so that volatility. Or are you being more conservative now because the supply hasn’t become automatic or created volatility in the downside. You know have learned from that and you are saying we are going to more cautious even if those markets are extrapolating, we could extrapolate positively?

David Santee

Yes. So, there’s a lot of questions there.

Ivy Zelman

Sorry.

David Santee

Let me just use Boston as an example. So we know that, you know 2016 as an example we’re delivering 2,300 units in Boston. The good news is, is that a lot of those units are now in the suburbs. And I think on our last call we said that we have, you know this 12 to 18 month window where, you know 2017 deliveries kind of moved back into the urban core, the Seaport, what have you – so that’s why were seeing better revenue growth in Boston. You know, even though we delivered 5,000 units in 2015 in the urban core. We were still able to hold occupancy at 96%, new lease rents were flat. And we were still able to get renewal increases. And you know, that’s kind of the – what we’ve experienced, you know over the years is that, you know, even though these you know, the markets that were in today, you can still deliver product, hold the occupancy, but feel the rate pressure.

And then when – the new deliveries move away from you, you start to get pricing power back. And I think, you know, that’s – I think were just kind of in the middle or the beginning stages of getting to that – that point in San Francisco and New York. You know, but again, it’s kind of the mix of jobs and where the deliveries are. So you mentioned Seattle, I mean Seattle is delivering –I think they delivered 6,000 units – 5,000 units last year. So we have to get deliveries in 2014, the occupancy continues to hold, we’ve continued to be able to push rents. You know we expected in Seattle that we would see, pricing pressure in Belltown, central business district, Capitol Hill but now we’re seeing, revenue actually accelerate in those markets as we begin to absorb. So it’s just the combination of jobs, level of absorption, and the relative location of the new supply.

Ivy Zelman

That’s extremely helpful. I guess just to summarize if I may respectfully, so then with the current footprint with the exception of New York and San Francisco, you would argue that you are still optimistic with respect to the go forward deliveries and utilizing what you see today currently in the guidance you given us. You haven’t cut those markets despite them being – may be much better even than you had been modeling. So you’re utilizing the similar pattern to expect that those markets will continue to be where they are today.

David Santee

No.

Ivy Zelman

Okay, okay.

David Santee

Look, right. And I think we’ve said to previously, that you know, all these markets are generally on track. They are either you know, a tick below or a tick above. But there’s nothing material in these other markets that would cause us to be you know overly optimistic or overly pessimistic. They are what they are. They are right on track and we’ve kind of left them there for the rest of the year.

Ivy Zelman

That’s very helpful. If I could sneak in one more and again thank you so much for taking my question. The last one relates to just where cap rates are and I think David Neithercut you talked about the tightness of the transaction market despite the fundamentals that might be in the margin starting to moderate. If you think about where I guess directionally if you think cap rates are going to go, assuming rates are holding constant, do you expect the fundamental to start writing out, seeing more opportunities especially at the capital market, may not be or the banks are pulling back and being more stringent. What’s your thought and outlook on cap rate?

David Neithercut

Well it is not just cap rates, it is results and valuations too, right – ultimate valuations. I mean one of the things we done as we’ve seen this new supply coming is to reduce our own construction upstarts. Well we are delivering a lot of product now but we’ve got very little of anything kind of behind that. And it is very possible that we might see and I’ll use the term loosely, opportunities to acquire assets in these markets. We think valuations are pretty solid. Depending on what happens to interest rates and global interest rates and demand for yield. We know where cap rates might go on extremely good quality, well located assets in the kind gateway cities that we’re in.

One reason we reduced our development business is because where we saw yields going and we saw new supply and we thought it may be a better deal for us to maybe buy completed assets rather than build our own just given the amount of supply that was coming. But it remains to be seen where cap rates certain and where values are headed.

Ivy Zelman

Great, good luck, guys. Thank you.

David Neithercut

Thanks very much Ivy.

Operator

And now we’ll hear from Vincent Chao with Deutsche Bank.

Vincent Chao

Hey everyone. Just going back to San Francisco and New York for a second. We’ve talked a lot about them obviously. But as far as the decline in the outlook for those two markets, we talked about rate after August not being as big a factor of occupancy and concession is bigger. But I guess San Francisco not seeing concession today. Are you building in any increase or is that just the assumption that concession levels will stay similar and that in New York same thing you are seeing concessions there. But are you projecting any change in the level of concessions over the back half.

David Santee

We’re not forecasting any concessions in the back half. I guess what I would say is that we, we’ve accounted in San Francisco, we’ve accounted for that with 100 basis point spread in occupancy. So if occupancy comes down far enough, then we would – or if we see occupancy going in the wrong direction, we would use concessions to boost occupancy up. And that higher occupancy kind of would offset any concessions that we would – that we would need to offer. But we’ve really just factored the net effective new lease pricing for the balance of the year in San Francisco.

Vincent Chao

Okay. And then net effect will be similar to what you are seeing in July and August I guess?

David Santee

If not a little lower.

Vincent Chao

Okay, thanks.

David Santee

You are welcome.

Operator

And now we’ll take a question from Tom Lesnick with Capital One Securities.

Tom Lesnick

Thanks for taking my questions. First on development and peers like you guys moved up to stabilization dates on a lot of your developments this and 99 in particular over the last quarter. Is that due to the concessions you are offering right now. It feels kind of counterintuitive to the narrative that the Bay Area development leasing is slowing?

David Santee

Actually we said nothing close to lease up in development long. Our absorption and our transactions in San Francisco have exceeded our expectations and we have significantly moved up the stabilization [indiscernible] because our absorption there was almost doubled what our real expectations were. And we were looking at 20 or so a month and we have been doing almost 26 a month. No one thought that would necessarily continue which is why it took us so long to change that stabilization date. But were moving right along there and I’ll tell you that we been doing that with concessions of two weeks to one month. And again at rent stand above our pro forma expectations but maybe modestly below what we might have hope we would do at the beginning of this year.

So the absorption of our San Francisco transactions have been strong and the lease rates have – exceeded our regional expectations and so the deals were stabilized at yields ahead of what we had originally underwritten.

Tom Lesnick

Okay. Thanks for that insight. And then getting away from New York and San Francisco for a moment. Let me…

David Santee

Thank you.

Tom Lesnick

Feel like right now is the right time for 100 K Street. There has been a lot of development in there lately what do you feel like right now is the time to strike?

David Santee

Well because we’re delivering 18 and stabilize in 19. And we’re seeing improvements in the market. That product has been absorbed. David talked about it maybe modestly performing better above we had hoped. And we think, you know, who knows what 18 and 19 will bring? But we think there’s not a lot starting now and that will be a fine time in that marketplace to deliver new product.

Tom Lesnick

All right. Thanks, guys.

David Santee

And again at $88 million deposits not going to either one way or the other Tom.

Tom Lesnick

Makes sense. Thanks again.

David Santee

You bet.

Operator

Now we’ll hear from Wes Golladay with RBC Capital Market.

Wes Golladay

Good morning, guys. When we talk about Northern California what do you see in the various submarket there. I imagine, Berkeley, Michigan Bay are probably the hardest hit. Give your high level do you have ever work in the region, anything hanging in there?

David Santee

Yes. So I’ll just kind of go major submarket in San Francisco. And talk about kind of where rents are today relative to same week last year. We have Berkeley, which is more student driven, it was only down 0.5%. Obviously San Francisco, proper is down 5.4%, which is actually bolstered by one property when you look at Geary Courtyard, SoMa, those are kind of ground zero where the new deliveries are. Those are down 11.5%, 8% on rents. East Bay is still flat. East Bay continues to hold up relatively well. The Peninsula, we have some new deliveries there that are more attractive to Millennials. Those rents are down about 5% and then South Bay, which is really put a lot of new deliveries behind it, is down 2%.

Wes Golladay

Okay, and thanks a lot for that, excellent color. And then looking at the fast leasing pace for your San Francisco development, how does that – you mentioned [indiscernible]. Are just pulling from other communities based on what you’re seeing from the application of new renters?

David Santee

Yes, I think – what David had commented earlier, we’ve got the ability people to sort of move from older products – the first wave of new supply that’s been delivered in San Francisco in years. And people have the ability to move across into newer product, that you know if not modestly more around the same they were paying for lesser quality products. So we just sort of seeing – our tenant base have had more options than we been seeing them move to our properties from elsewhere in the area.

Wes Golladay

Okay and would you characterize that as coming from maybe the other cities or the East Bay or is it mainly within the 3 mile to 5 mile radius where you’re getting most of the movements from?

David Santee

Do know the answer to that question David? We’d certainly would have that but in the system but we don’t have that at our fingertips.

Wes Golladay

Okay. I’ll follow-up with you. Thanks a lot for taking the question.

David Santee

Thanks, thank you.

Operator

And now we’ll take some follow-up questions. One from David Bragg, Green Street Advisors. Please go ahead.

David Bragg

Thanks again. Just to review your market level, revenue growth expectations. It would be helpful to hear about the other markets. I think you said you’re currently expecting 6.5% same-store revenue growth from San Francisco, 1.5% in New York. I assume that these figures underpin the midpoint of your revenue growth guidance and if that’s correct if you could just run through the other markets.

Thank you, for that. And then next, in the second quarter for the entire portfolio, what were the gains on renewals and what were the gains on new move-ins, ideally lease-over-lease?

David Santee

Okay, lease-over-lease renewal pricing for Q2 was 5.9%. Lease-over-lease on new move-ins was 1.5% and then combined, was 3.7%.

David Bragg

Okay. And then can you tell us what you’re expecting for the portfolio on those two metrics for 3Q and 4Q?

David Santee

Yes, I would have to give you ranges. But you know I see renewals moderating down to call it, four to five. And then new lease – new move-ins, I mean obviously new move-ins, because of the seasonality they just automatically compress. So as an example, Q1 of 2015, we did 40 basis points. So I would imagine in Q4 of 2015, we did minus 40 basis points. So it’s just the natural cycle, I would expect them to fall off the balance of the year. To what degree is really just a function of, again going back to that who moved, which resident moves out and at what property.

David Bragg

Okay so no specific range on new move-ins. But the renewals is 4% to 5% range and that compares to what looks like about 6.5% on renewals in the second half of last year? Is that correct?

David Santee

Renewals, yes, 15 renewals were 6.8% and Q4 renewals were 6.4%.

David Bragg

Okay. One last one for you David Santee, on this topic, you’ve experienced a dramatic widening in the spread between new move-ins and renewals in San Francisco, how long can that persist, especially in this day and age when there’s such great visibility on where new units are being priced in the market?

David Santee

Let me answer your question this way. San Francisco, in July, we achieved an 8%. We are issuing new renewals kind of in the October range at a 5.8%. So we issued in July 11.1%. In October we are issuing a 5.8% if that kind of gives you what you need.

David Neithercut

And we achieved 9% in the first half of the year.

David Santee

Right, right.

David Bragg

Okay. So the renewal gains are declining or decelerating in [indiscernible] more or less with new move-ins. The spread is remaining somewhat the same sounds like.

David Santee

Well I guess what I would say is that, obviously, we are at a juncture where we need to, it’s in our best interest to retain every resident possible. Because we have a 40% chance that we could take a 15% drop on the new rent, every time one of those residents move out. So we’re consciously being conservative on our issuance of renewal increases from this point forward.

So hopefully, I mean the spread has gone from the typical 180 up to 350, 400 basis points. Hopefully, as we issue more market friendly renewal increases, that the spreads will compress back down to 180 if not lower.

David Bragg

All right, thank you again.

David Santee

You bet Dave.

Operator

And Nick Joseph, Citigroup. Go ahead, please.

Nick Joseph

Thanks, one last quick one. Given your experience this year and the more uncertain operating environment that we’ve been talking about, are you planning on providing preliminary 2017 same-store revenue growth guidance with Q3 results?

David Santee

Well, we haven’t made any decision about that, Nick. My guess is the experience we’ve had this past year, I’m sure most people here would not like to do that. Just given the volatility. If we feel like we could give a number that we believe is valid and helpful, we’ll certainly consider it. But I think with this, given the level of volatility we’re seeing, we’re not sure that would be in anyone’s best interest at the present time but no decision has been made.

Nick Joseph

Thanks.

Operator

And now we’ll take the question from Richard Hill, Morgan Stanley. And Mr. Hill your line is open please un-mute it if you have muted. I’m hearing no response from that line. I will turn the call back over to your host for any closing or additional remarks.

David Neithercut

Thank you. Thank you all for your time today. I hope you all have great remaining part of the summer and we look forward to seeing many of you in September.

Operator

And with that, ladies and gentlemen, this does conclude your call for today. We do thank you for your participation. You may now disconnect.

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